translated into higher wages.

In the monopoly union model the trade union unilaterally picks the wage and since the solution 1,, the firm unilaterally chooses the level of employment it wants at that wage. In the (8.13)-(8.14) into (8.

next union model this setting is made more realistic by assuming that the firm and the RTM model (the the union bargain over the wage rate.

level. As a result, the fully employed union is only interested in high real wages, Furthermore, the st, , and its optimal strategy is to set w = AFL (N , k). This is the point of intersection ofII the FE line and the labour demand curve. Any productivity shocks are immediately 7tw + ITLLI;', = 7r„

1

(v — f7) -1 [11